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Friday, November 2, 2012

Ohio Attorney Sentenced to 85 Months in Prison for Tax Fraud and Obstruction of Justice Crimes

The Justice Department and Internal Revenue Service (IRS) announced today that attorney Aristotle R. Matsa (Rick Matsa), of Worthington, Ohio, was sentenced to 85 months in prison by the Judge Edmund A. Sargus Jr. of the U.S. District Court for the Southern District of Ohio. Judge Sargus also ordered Matsa to pay a criminal fine of $265,000, make restitution to the IRS in the amount of $388,000, and pay restitution to a client from whom Rick Matsa embezzled funds in the amount of $24,069.

After a five-week trial in Columbus, Ohio, a jury convicted Matsa of numerous tax fraud and obstruction of justice related offenses, including witness tampering and making a false statement. Matsa’s mother and co-defendant, Loula Z. Matsa, was sentenced today to three years of probation and ordered to pay a $150,000 criminal fine for her role in the conspiracy with her son to obstruct justice, commit perjury and make false statements.

Rick Matsa individually was convicted of one count of a corrupt endeavor to obstruct and impede the IRS, 15 counts of aiding and assisting in the preparation of false and fraudulent tax returns, that related to five different trusts; one count of willfully failing to file a Report of Foreign Bank and Financial Accounts (FBAR); one count of conspiracy to obstruct justice, commit perjury and make false statements; two counts of witness tampering; one count of submitting a false statement; and one count of obstruction of justice.

According to the indictment, which was returned on June 23, 2010, and the evidence admitted at trial, Rick Matsa, who in addition to being an attorney was also an architect, a real estate broker, and a licensed minister in Ohio, created and operated several nominee entities in order to disguise and conceal his income and assets from the IRS. The false trust return charges relate to filings for at least five separate trust entities during the tax years 2003 to 2005. In fact, the evidence at trial showed that he had been filing similarly false returns for the trusts dating back to 1990. Each of the trusts reported receiving significant amounts of interest income each year, yet no income tax was ever reported as due because the trust tax returns fraudulently claimed deductions for distributions purportedly paid annually to a foreign beneficiary.

The evidence at trial established, however, that Rick Matsa used funds from these trusts to purchase a 150-acre farm in Hocking County as well as a home in Worthington, both of which he used as a personal residence. In addition, the trusts’ purported foreign beneficiary was located in the Netherlands and testified that she was not the beneficiary of the trusts.

The evidence at trial also showed that Rick Matsa violated FBAR, the foreign bank account reporting requirements, by failing to disclose his ownership and control over a foreign bank account held in The Netherlands during calendar year 2003, where an account was maintained by Rick Matsa with funds in excess of $300,000 from at least August 2003 to November 2003.

The evidence at trial further showed that after learning of the federal grand jury investigation into his business activities in May of 2006, Rick Matsa, together with Loula Matsa and others, conspired to obstruct justice by concealing evidence from the grand jury, making false statements to the grand jury, creating false documents, tampering with witnesses and lying to federal investigators.

George Pappas, formerly an attorney in Urbana, Ohio, who previously pleaded guilty to making false statements to federal agents during the grand jury investigation, testified at trial. Pappas testified that he falsely claimed ownership of Rick Matsa’s law firm, located in the Short North area of Columbus, in their efforts to withhold records from the grand jury. Pappas was sentenced to two years probation and a home confinement term earlier this year.

Rick Matsa’s tenant, P. Maria Galloway, the owner of an art gallery located next door to Matsa’s law firm, also testified after pleading guilty to conspiracy to obstruct justice. Galloway testified that she signed numerous documents at Rick Matsa’s direction, including federal income tax returns for Matsa’s law firm and a number of his nominee entities, which Matsa used as part of his scheme to obstruct the IRS, and that she made false statements to agents and the grand jury during the investigation. Galloway also was sentenced to a two year term of probation earlier this year with some home confinement.

“Prosecuting individuals who evade taxes through fraudulent schemes has always been and will remain our priority,” said Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division. “The sentence handed down today demonstrates that nobody, and especially not an attorney, should expect to profit financially at the expense of the American taxpayer.”

“Mr. Matsa created and operated several nominee entities in order to disguise and conceal his income and assets from the IRS,” said Richard Weber, Chief, IRS Criminal Investigation. “Today, Mr. Matsa is finding out IRS special agents will untangle complex financial transactions to hold accountable those seeking to evade the legal responsibility to pay taxes.”

Assistant Attorney General Keneally and Mark D’Alessandro, Acting U.S. Attorney for the Southern District of Ohio on this matter, commended the IRS-Criminal Investigation special agents who investigated the case, as well as Tax Division Trial Attorneys Richard M. Rolwing, Jorge Almonte and Steve Descano who prosecuted the case.